(Part 3) The Data “Revolution” in Healthcare: Obstacles and Opportunities

Part Three: Election Day special: Regulatory Obstacles (continued from Part Two)

By Ellen Martin


Here is a 352-page description of US healthcare regulation as of 2006: Robert I. Field’s Health Care Regulation in America: Complexity, Confrontation, and Compromise. Click Here

It is always mind boggling to hear so many in Silicon Valley toss throwaway lines about the failures or limits of the “free market”, when anyone with a view into enterprise IT (or every other aspects of running the business) for an employer, provider, insurer, pharmaceutical, or device company must cope every day with a broad and deep maze of regulations.

Various attempts have been made to calculate the annual costs of regulation in healthcare. For example the Cato Institute back in 2004, estimated an annual cost of $169.1 billion (with a very big error bar) of net benefits.

Most of the Federal agencies directly involved in healthcare fall under Health and Human Services. HHS has ten sub-agencies (see the HHS org chart for a complete 2012 list).

I’ll just call out the main four that are most relevant to this data discussion:

  • NIH: medical research, funding
  • FDA: marketing and safety of pharmaceuticals, biologicals, medical devices and manufacturing of all three
  • CDC: public health surveillance
  • CMS: Medicare and Medicaid plus institutional accreditation requirements and, more importantly, setting reimbursement prices and codes that are used as benchmarks by private payers and providers.

The Department of Defense administers the Veterans Health Administration and the Military Health system. In total, Medicare, Medicaid and the military health system, including veterans, pay for the care of about 30% of Americans.

Other Federal agencies that incidentally impact health care enterprises and IT requirements for reporting and compliance include OSHA, NLRB, ERISA, and the EPA.

Every state, county and city is responsible for a myriad of licensing, accreditation and other regulations, covering physicians, nurses, and other healthcare professionals; hospitals and other provider institutions. There are also a large number of non-government (self-regulating) organizations involved with licensure, accreditation and oversight.


Since 2006, there have been big new regulatory initiates (HIPAA, ARRA, ACA aka Obamacare,

  • HIPAA, “Meaningful use”, medical records, privacy, with a huge impact on the IT of all healthcare-related organizations.
  • ARRA (stimulus funds as incentives for EMR/EHR conversions, which require IT)
  • The ACA: even Kaiser Health News points how the new health exchanges (to pick one aspect of a 2000-page bill), present many new complications.

The health law, however, takes this simple idea and makes it extraordinarily complicated – if not impossible – to execute. By adding a litany of new minimum-insurance requirements and regulations to the original bipartisan idea, health insurance purchased through an exchange will likely end up more expensive than it is now.” 

A large number of complex regulations favor large organizations (insurers, providers) who can devote entire departments to compliance and coping with multiple reporting requirements (with IT ultimately holding the bag) as well as lobbying any political activity to push further regulation in their preferred directions. As I well know from a small business perspective, this disfavors smaller, innovative organizations (barriers to entry, costs of compliance) and approaches. Further hazards include “regulatory capture” (where the regulated control the direction and enforcement—e.g., certain IT vendors, “green light bulbs”) and cronyism (where politically well-connected organizations earn legislative and enforcement favors), or outside contractors who benefit from the new streams of tax moneys available to build out further regulation. See this discussion: Click Here

Finally, here’s a link to a post that sums up the complexity of the current US healthcare system, not just regulation, of course, but all the complexity generated by the employer-provided, third-party payer system. Click Here

Most suggested solutions center around more regulation, which is somehow assumed to eliminate self-interest and streamline the system, as if only markets are subject to failure, never government. Click Here

Tim O’Reilly suggested at StrataRx “Maybe we’d love government as much as Apple if the interfaces were better.” Oh, really? Would the impacts of all of the above on enterprise IT planning and implementation be significantly mitigated by better interfaces?

Next post will outline some of the IT-specific obstacles.


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